Economic policy

Message for Evangelical Voters

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Everyone seems to have written off the evangelicals as a lost cause. We hear from many directions that they regard Trump as chosen by God to lead the country from infamy to some kind of evangelical paradise. That’s despite a personal history that is anything but Godly.

However personal history is not the issue. The message to the evangelicals has got to be something much more to the point. Despite the rhetoric, the fact is Trump is NOT THEIR GUY. He’s a con man doing what he’s has always done: make money off people who have the misfortune to trust him. He and his hacks are the ones saying he’s chosen by God. He has grabbed hold of an issue that means nothing to him, so that he can pick their pockets and run the country for himself and his ilk.

He has delivered on abortion. No money in that. What is money is tax breaks to big business donors and Trump himself. He did that last time, and he has said he is going to do it again. Already last time the massive tax cuts in good times went mostly to Wall Street and left the country with a record increase in debt. Further custs would be felt in medical care costs, education costs, the environment, and Social Security. There won’t be any “winning for his people”.

He has also said that he is opposed to democracy and is going to rule accordingly. That does NOT mean he is going to run the country for you. It means that he is going to run the country for HIM, and there won’t be a single thing you can do about it. This will not be the idealized American past of peace, friendship, and family values. It will be an unChristian paradise where anything goes for the rich and powerful, with nothing for the well-being of anyone else. Unafordable healthcare, no labor or environmental protections, no future for anyone’s children outside the rich. In all his bankruptcies Trump sucked out money and screwed the contractors and vendors who trusted him.

Biden is not threatening your practice of religion or anything else about how you live. And he regards himself as President responsible for the whole country, including you. You may find that much of what he has proposed is relevant to you. There is also no threat to your continued voice in the running of the country.

Trump is NOT the unGodly warrior for Christ. God is only his foot in the door. After that there’s the lesson repeated over and over in history: enemies of democracy are no one’s friend.

An Important Obvious Point that gets Missed

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It is customary in discussing Biden’s economic policies to acknowledge that the last stimulus package was a mistake. A well-intentioned act perhaps but a mistake nonetheless. (Republicans of course say that all the stimulus packages that kept the country running were a Great Big Democratic Disaster–complete nonsense but a different story.)

Is that true? Well, it is certainly true that the stimulus package stimulated the economy. However it is also true that there were other factors that contributed to inflation: the unanticipated shortage of chips that affected not just electrical equipment but even the production of cars, and also the bottlenecks that developed in shipping and other forms of product transportation worldwide. These affected inflation categories such as the price of used cars for example that drove up the consumer price index. There was also profit taking by large companies in food processing, for example, that were able to manipulate pricing in markets they controlled.

So there is no question that significant parts of the inflation were not due to the stimulus. What was a result of the stimulus however was that people had more money to spend. This is usually discounted entirely by saying that “but it didn’t keep pace with inflation”. That line of argument is false, because a good chunk of the inflation was going to happen regardless of the stimulus.

Biden’s position was that with the end of Covid the US was moving into a period of extreme economic uncertainty, and in such a situation one should err on the side of keeping people as close to whole as possible. That is precisely what happened. The main result of the stimulus package was that people had more money to spend to deal with a lot of unanticipated inflation that had nothing to do with the stimulus itself.

Despite all of the tons of nonsense that have been printed, Biden’s stimulus package was correct policy both in view of what was known at the time and in view of what actually happened.

Right-Wing Fantasyland meets Chinese EVs

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There was a good article in Bloomberg today describing the many aspects of Chinese dominance in EV’s.  It’s useful if discouraging reading.  How did this happen?  Why is the West so far behind?

Obviously there are multiple items and reasons behind them.  However all of them trace back to a single big one:  the endlessly propagandized right-wing fantasy of the miraculous, all-knowing, perfectly-adaptive private sector.

In this case there were two principal failings of the private sector:

  • Denying climate change, because it was inconvenient for current operations.
  • Discounting any role for government, because the private sector by definition knew better

With these two failings the private sector was blindsided by a market transition they had gleefully dismissed as nonsense—because it didn’t fit with current mindset and current operations of business.  The Chinese did strategic planning, and the private sector in this country congratulated itself on its ability to squelch it.  The oil companies are still at it.  Trump will do it again if he gets a chance. We lost four years of opportunities to position for change–an eternity for competition.

That is not a surprise.  There are things the private sector does well—principally optimizing current operations.  However the current economic powers-that-be are very poor at major transitions.   Instead they will act, as in this case, to hang on to the optimized past and to delay that future for as long as possible.   In other words to defend their their own immediate private interests against the interest of the country as a whole. 

Government of course has no perfect crystal ball, but it doesn’t have the same limitations and the same vested interests. It can act to support future businesses even before their time has come.  We have had some of that.  Both Tesla and SpaceX exist because of Obama-era seed money. (Some readers may remember Romney’s ridiculing Obama for such initiatives!) The mRNA vaccines that stopped Covid were only possible because of decades of government-funded research.  All of that in the face virulent right-wing opposition.  The Chinese government locked up resources and initiated new businesses.  We were too smart for that!

The bottom line here is explicit.   The private sector is not a miracle machine.  Its interests are not the same as our national interests, and it can’t even do a good job of providing for its own success.  We need government to care about the well-being of our people and even about the well-being of its businesses. 

As a final point here it’s worth noting that–contrary to the usual sloganeering–when Adam Smith talked about the “invisible hand” of the marketplace, he was not arguing for government to stay out of the miraculous private sector.  Instead he was making the case for a competitive “free” market, something only possible if government would stop the private sector from perverting the economy with monopolies and government influence.   That’s still a battle today!

The Debt Limit fight is a Coup

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We’ve been hearing about the debt limit for months, but familiarity makes it sound sort of normal.  That is spectacularly wrong.

We all know it would be a disaster for this country to foreclose on its debt.  That would not only have massive economic impact, beyond that it would undermine international confidence in the United States for any of its commitments.  That the Republican Party is playing chicken with those consequences shows just how divorced it is from the well-being of the country.  What’s not to like about a forced recession in a Democratic President’s election year??

However even that doesn’t do justice to what is going on.  The issues under discussion are not merely financial.  McCarthy is going after specific parts of the Biden legislative agenda with his own alternatives.  The debt limit fight is an effort to replace our Constitutional form of government with a new Republican agenda forced upon the country at gun point.  That is not an exaggeration.

The Debt Limit fight is a coup.

We Can’t Afford That

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Heather McGhee begins her book The Sum of Us with the question “Why can’t we have nice things?”.  And she makes clear what she means: “basic aspects of a high-functioning society, like adequately funded schools or reliable infrastructure, wages that keep workers out of poverty or a public health system to handle pandemics”.

She then goes on to explore how racism has been systematically used by the wealthy and powerful to keep that from happening—which is to say how they keep that money and power for themselves.  I’m happy to promote her book, however I also want to spend a little time here on her question—on the mindset that says we can’t.

My example is Biden’s student loan forgiveness plan.  I’m not going to argue the details.  What I am going to argue is the senselessness of the knee-jerk reactions, i.e. how ridiculously entrenched is the idea that we just can’t have nice things.

The cost of the program was estimated by the government accounting office as $400 B, which puts it in the same ballpark as some stimulus packages.  Virtually without exception that number was taken by the press at full face value.  This was ridiculously, “humongously” expensive.    It was going to undermine free enterprise everywhere, drive inflation, and possibly bankrupt the country.  “We can’t afford things like that.”

There are two problems with that assessment. Let’s start with the $400 B number.  For accounting reasons, it is for a program lifetime total taken over 30 years.  That reduces the average yearly value to $13 B, which is the number to compare against stimulus packages.  Except that number is itself too high.  Again for accounting reasons it assumes that all current debtors will keep paying for the full period—something that has never happened in the past.  Let’s take $10 B as a nice round high estimate, and compare it with another per-year item in the budget—the defense budget just passed.   That number is $858 B. The humungous expense is 1% of that total.  It’s not even big enough to count as a rounding error, and the inflation claim is a joke.

We’re so used to “we can’t afford things like that” that the press can’t do even that much arithmetic.

What’s more (on the free enterprise issue) that money was spent because college had become vastly more expensive precisely during the worst downturn since the Great Depression.  (And the Republican legislature refused to do anything about it—hiding behind the bogus “balanced budget amendment”.)  We like to talk about equality of opportunity.  We, the USA, pioneered high school for all.  In today’s economy college or some other form of post-secondary education has become necessary for good jobs (and bad jobs in this country won’t even get you above the poverty line!).  So we’re not talking about buying televisions on credit—we’re talking about most people’s only chance at a middle class existence.

Biden’s debt forgiveness plan does not fix everything wrong with affordability of education. And it isn’t means-tested (although people who borrow are usually not rich and means tests are almost always counterproductive).  But it is a step forward and addresses a real problem that was not caused (despite the rhetoric) by sheer profligacy.  And the most ardent critics of the incomplete solution are the people committed to doing nothing at all.

Most galling, however, is the universal knee-jerk of “we can’t afford things like that” which can’t be bothered for even a cursory look at what’s real.

Call to Action

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Democrats must challenge Republican lies about inflation. The Republican message is simple: “Inflation is caused by Democrat’s unrestrained spending. Elect us and we’ll stop that and fix it.” Both parts of that message are lies.

Inflation is everywhere in the world and we’re generally on the good side of average. That last Covid payment is not what turned the world upside down. We’re still fighting the product and labor bottlenecks that persist. Republicans haven’t proposed one single bit of a plan.

Furthermore, as several authors have pointed out, Republicans are anything but a safe choice. We’re not talking about the old conservative Republicans. These are Trump’s burn down the house people. With the debt ceiling blackmail, Republicans are going after Medicare and Social Security with a threat of liquidity collapse if they don’t get it. We’re going to outdo the British Conservatives with Liz Truss!

Finally it needs to be recognized that the Republican argument on inflation is just a rehashing of the usual Republican program of presents to the rich. Inflation is the lastest bogeyman to say we can’t have public services or anything else that rich people don’t want to pay for.

A Message for Democrats Now

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It has become clear from all polls that the key issue for voters in this midterm election is inflation.  That’s a difficult issue for Democrats, so we have tried to make it something else:  January 6, the Supreme Court, etc.  The time has come to realize that all of that has failed.  That’s particularly scary, because all of the crazy people we helped nominate in Republican primaries now stand a good chance of being elected—because voters view Republicans as better for the economy, regardless of how crazy a particular candidate may be.

So there is no substitute for taking on inflation as an issue.  It’s not as if we have no answer for this, but the time to act is now.  Please, please contribute to this.  For what it’s worth l give a few points here.

  • Current inflation is not something created by the last stimulus checks. 

Inflation is a worldwide phenomenon, and we are actually at the low end in the Western World.  It is the worst in 40 years, because we haven’t had anything like Covid for many decades.  Even today we have many categories of manpower shortages (e.g. women who can’t work because daycare centers were closed by Covid) and product shortages (e.g. in electronics) as well as changes in demand patterns (e.g. in real estate).  Energy prices are being manipulated as we resist Russian aggression in Ukraine.  We have been working to deal with all of this.  There is no simple case where none of it would have happened.   Further, since Republicans are pretending they can blame everything on Democrats’ spending, they have no plans to make any of it better.

  •  There isn’t any inflationary profligate spending in the rest of the Democrats’ program

Republicans are rushing to take responsibility for results of the infrastructure bill—even in many cases where they voted against it.  Most of the population recognizes that the climate measures are absolutely necessary.  For student loan debt, many people seem to have been confused by the $400 B figure attached to the program.   In fact this is an accounting issue, where the number is spread over decades, without any significant near-term or per year effect.   It should also be noted that college tuition costs essentially doubled starting in 2008, so there is an issue to be addressed.

  • The current Trump Republicans are not the fiscally conservative, reliable Republicans of old.  They are ready and willing to sacrifice all of us to the wild idea of the day. 

The now-serious debt ceiling blackmail is a case in point.  Republicans are ready to throw caution to the winds—in a very precarious world economy.  Massive cuts in Medicare and Social Security would be on the block in such an effort.  And forcing a US default in today’s world would create a liquidity crisis to make the Liz Truss affair look like nothing at all.  Trump Republicans are also ready to tank the economy if they think that will help elect their hero in 2024.

One British observer described similarities across the Atlantic: “Like the Republicans in the United States, the Conservatives are detached from reality. In a generation, they have become a party of monomaniacs, incompetents and ideologues.” We shouldn’t be laughing about Liz Truss here.

The Depression of the 2020’s

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We’re not paying enough attention.  This midterm election hides a real danger of Depression.  We’re stumbling into exactly what happened in the 1930’s.

The Great Depression of the 1930’s occurred when the financial authorities of the day responded to a sudden downturn with the opposite of what was needed.  A straightjacket of fiscal austerity was applied (by the self-protecting upper classes) in place of the stimulation that would have enabled recovery.   That shut down everything in the US and much of the western world.

We are currently fighting inflation.  That’s a tough battle and will cause a slowdown that is some variety of recession.  It’s what happens next that matters. 

The only reason we got out of the 2008 recession was that there were enough Republicans to join Democrats in passing a stimulus package early on.  Already by 2010 there were few of those Republicans left, and any further stimulus was blocked in the name of the bogus “balanced budget amendment”.  The goal was national pain ahead of the 2016 election.  It worked.

We’re in that situation again, but the dangers are much worse.   To state the obvious, the worldwide economy is in extremely fragile state:  inflation is everywhere (we’re actually on the low side), there is war in Ukraine (with direct consequences for many countries), energy prices are rising from Saudi greed, there’s even a dictatorship-induced slowdown in China, and (compared with 2008) there is very little international cooperation.  Forced austerity is exactly what brought the world economy down last time, and we’re going to get it again.

For today’s Republican Party a recession is an opportunity.  A Republican (Trump) Congress will do anything to bring back their hero.  As in 2014 there will be no possibility of stimulus no matter how bad things get, because pain is the goal.  By 2024 it will be too late for any short-term way out. 

The Great Depression was so bad, that it seemed that people would always remember what happened and never do that again.  Unfortunately we’re there.